Share Market

There are basic principles of investing which helps in making good and bad decisions, buying good-quality stocks whereby one needs to set goals and chase their performance and abandon or almost giving up after one grinding bear market, but most of all continue to learn more every step of the way, with the help of some principles which one needs to keep in mind while investing.

Lesson 1: Diversify. One needs to diversify in the stocks and bonds that one purchase.

Lesson 2: Start investing early. Compounding is your best friend. The longer you have your money working for you, the more you will gain.

Lesson 3: Invest in things you know. As how Peter Lynch said it best when he said, “Never invest in an idea you can’t illustrate with a crayon.”

Lesson 4: Avoid fads. Past performance of a stock is a rotten predictor of future results. If everyone is talking about hot stocks, like the conglomerates back then, like internet stocks in 2000, or like nano-technology today, you’re too late.

Lesson 5: Don’t let a market slump change your long-term investment plan. One needs to be optimistic and look beyond the market rates to make spectacular gains of the market, even when the market is in slumps, so that one can gain from the market rebound

Lesson 6: Don’t check the price of a stock (or mutual fund) after you’ve sold it. After you’ve made a decision, stick with it. Look ahead, not behind; remember, today is the first day in the rest of your life. The “what-if game” (What if I bought this? What if I hadn’t sold that?) only leads to recriminations and beating yourself up over something you can’t do anything about.

Lesson 7: Don’t panic. One should not panic when the market is shaky but have a close and careful look at the market and continue to trust one’s instinct of the market bounce ability.

Lesson 8: Pay attention to what’s going on with your investments. No stock is safe forever. Even the bluest blue chip can turn into a cow chip. The old maxim of “buy and hold forever” doesn’t work very well in an economy as vibrant as exists in the world today.

Lesson 9: Hold onto your winners and sell your losers. If you wouldn’t buy more of a stock today on which you have a loss, sell it. Don’t wait to “get even.” Chances are there are better ways to invest your money. No well-managed store keeps obsolete goods in inventory; neither should you keep losers in your investment portfolio.

Lesson 10: Take your losses quickly and your profits slowly. Every 50% loss begins with a 10% loss. Better to take the loss sooner, not later.